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Question - Analyze what would happen to the equilibrium price and quantity in the market for Pepsi if the following occurred. Briefly explain your answers.
The price of Coke decreases.
Average household income falls from $50,000 to $43,000.
There are improvements in soft-drink bottling technology.
The price of sugar increases and the Pepsi launches an extremely successful advertising campaign.
Analyze the following demand and supply equations to answer the questions.Demand Equation: Qd = 100 - 4P
Supply Equation: Qs = 10 + 6P
a. What is the equilibrium price? What is the equilibrium quantity? Hint: Equate Qd = Qs. Solve for the equilibrium price and then the quantity.
b. Assume the government places a price ceiling at $7 in the market. What is quantity demanded? What is quantity supplied? Is there a shortage or a surplus?
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